Pre-budget economic report


Business confidence remained lacklustre in April. NAB business confidence edged up to 3.0 in April, from a reading of 2.7 in March. 

This is below the 10-year average of 3.5 points. Business conditions fell to a reading of 4.1 in April, from 6.2 in March, which is just above the 10-year average of 3.9%.

Share Markets:

Energy companies dragged the US Dow lower overnight as the price of oil declined. The Dow and the S&P500 fell 0.5% while the Nasdaq was down 0.2%.

In Europe, uncertainty abounds. Will an agreement be reached on Greek debt?

If not, how much financial market disruption will occur? Investors took the cautious option and lightened their equity portfolios.

The FTSE100 was down 0.2%, the Dax fell 0.3% while the Euro Stoxx index fell 0.7%.

Interest Rates: 

US long bond yields spiked higher overnight rising 13 basis points to 2.28%.

They are now only marginally lower than Australian 10 year government bond yields.

US 2 year yields at 0.67% rose 4 basis points but remain well below Australian 3 year bond yields which stand at 2.08% and were unchanged overnight.

The US market appears to be readying itself for Fed action later in the year.

Foreign Exchange:

The USD dollar strengthened overnight while the NZD fell on expectations that its Reserve Bank will cut its overnight cash rate later this year.

The USD gained ground on the euro as negotiations over Greek debt continued.  The AUD was largely unchanged against the US dollar.


Oil was marginally weaker as supply looks set to remain firm. Gold was marginally weaker on the stronger US dollar while copper was also a touch lower.


According to unnamed Greek officials, the Greek government has completed the paperwork for the payment of €750mn due to the IMF tomorrow. 

Participants in the ongoing Greece-creditors negotiations in Brussels sounded cautiously optimistic that some progress was being made.

A statement is expected to be released later today, though it is likely more time and compromise will be needed for a deal to be reached.

Compromise is more likely from the Greek side, with the Government's opinion poll showing sliding and Eurozone membership even with austerity favoured by a majority of Greeks.


No major data released.

United Kingdom:

The Bank of England remained on hold overnight. The meeting was held a day later than usual on Thursday and Friday last week with the decision held over until yesterday to avoid risk of influencing the UK election.

United States:

The US labour market conditions index (LMCI), published by the Fed, was revised down from -0.3 to -1.8 in March and printed -1.9 in April.

This is the first negative pair of readings in nearly three years (May-June 2012). Given that the FOMC has tied monetary policy deliberations to the evolving state of the labour market, and developed the LMCI to better measure the health of the job market, this result is likely to favour the view that a hike in US rates will be delayed and will be mild when it eventuates.